Latin American Capital Markets

PROMOTING REGIONAL CAPITAL MARKET INTEGRATION 201tures or governance structures (DTCC 2000). Bilateral cooperative arrangements canalso be costly because they multiply in number and in complexity.Techno/ogyA second critical element common to most cooperative initiatives between marketinfrastructure institutions is the central role that technology plays in their development.Its significance is unsurprising, given its importance as one of the primarysources of costs incurred by such entities. Five simple aspects of technology developmenthave proved important in past projects:Governance• Building appropriate technology for market infrastructure projects frequentlytakes longer and is more expensive than is initially anticipated.• A ready-made technology package may be cheaper and more efficient thandeveloping a new one for a single project.• A good time to consider embarking on a cooperative project is when theuseful life of a particularly important technological aspect of market infrastructureis conning to an end.• Changes in technology should normally not be the prime motivation for attemptinga cooperative venture to deliver regional capital market integration.• Rapidly shrinking costs of computing and communications technology andthe ever-increasing power and sophistication of software being developedare strong factors against the need for a cooperative solution to market infrastructurebarriers to regional capital market integration.The third important element common to most cooperative market infrastructureprojects is the pivotal influence that governance has on their development and success.Linkages, joint ventures, and mergers are never neutral in terms of their effectson the various patrons of the participating organizations. As a result, one or moreconstituencies at the institutions potentially cooperating in a joint initiative frequentlyfear that it, or they, may be worse off if such a project were established.The governancestructures of the collaborating institutions determine how any benefits obtainedby the scheme will be distributed and whether those constituencies that believetheir interests might be harmed have the power to change or obstruct itsimplementation.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub